New tax rules include opportunities for deductions, credits

August 03, 2010|By Chad Mearns

Changes in tax laws could lead to a complicated filing season for taxpayers in 2009. "More than ever, taxpayers need guidance on how to claim every tax credit and deduction they can," H&R Block office manager Florence Yauneridge said during the branch's tax advisement day, held Jan. 15.

Throughout the day, company employees nationwide met with taxpayers to offer advice and insight on the new tax regulations, including the Housing Assistance Tax Act. The act was passed in September was designed to provide relief for first-time homeowners and those who do not itemize their deductions, senior tax adviser Fe Guthrie said.

The act includes an increase in standard deductions to offset property taxes for non-itemizing homeowners. The one-year provision increases the deduction by the amount of real property taxes paid or $1,000 for married couples filing jointly (or $500 for single taxpayers) — whichever amount is less. "A lot of people do own homes in Johnstown, but the majority of people cannot (itemize their deductions)," Guthrie said.

"It's important that everybody uses it this year because we don't know if it will be there next year." A Credit with a Catch: The bill also includes a credit for first-time home buyers, although Guthrie said the details of the provision can be misleading. "It's kind of deceiving the way they call it a credit. We want people to understand it is like a loan."

Eligible first-time home buyers purchasing a home between April 9, 2008, and July 1, 2009, can receive a tax credit for 10 percent of their primary residence's purchase price up to $7,500. Those receiving the credit, however, will need to begin repaying the amount received two years after the home is purchased. Payments will be made over a 15-year period.

Requirement Reduction: Another change this year reduces the eligibility requirements for the refundable child tax credit to $8,500 — down from last year's threshold of $11,750. The credit of up to $1,000 for each qualifying child under 17 is available even to taxpayers with $0 in tax liability for the year. Second Chance on Stimulus Checks: An additional credit may be available to taxpayers ineligible to claim an economic stimulus payment last year, Yauneridge said.

"They could possibly qualify for more of the stimulus payment they received last year under certain situations," she said. Eligibility for the payments, worth up to $600 or more for individual filers, was based on the 2007 tax returns. If a taxpayer's circumstances such as income or number of dependents has since changed, the credit could potentially be claimed on this year's return.

Foreclosure Forgiveness: More relief could also be available via an extensions of 2007's Mortgage Forgiveness Debt Relief Act, which protects taxpayers from being responsible for taxes on forgiven home mortgage debt. Previously, taxpayers were required to pay taxes on any balance not recouped by the bank during a home foreclosure, unless the taxpayer filed for bankruptcy protection.

The act extends the protection to those who do not file for bankruptcy, Guthrie said. "Because of this, the remaining balance that you owe is not going to be taxable to you." Keep That Receipt: Workers in certain professions are eligible to deduct certain work-related receipts, but Yauneridge recommended keeping close watch over records and receipts.

"What may be new is that Pennsylvania is becoming much more stringent in requiring receipts," she said. "Everything you can write off for the federal (return) is not necessarily true for Pennsylvania's." Receipts for mileage, licensing fees, professional organization dues, uniforms, work equipment, and professional development courses may be among the expenses deductible for some workers.